A PANIC Attack on Inflation and Unemployment in Africa: Analysis of Persistence and Convergence

The purpose of the study is to analyze the nature of inflation and unemployment rates -in Africa and its regions- allowing cross-sectional dependence among their countries. The paper contributes to the literature assessing the stochastic properties of unemployment and inflation using the recently developed and more powerful panel unit root tests namely PANIC -Panel Analysis of Non-stationarity in Idiosyncratic and Common Component- from Bay and Ng (2010). To check the robustness of our finding we added Pesaran (2007) and Chang (2002). In our analysis, many PANIC tests clearly show that the validation of the hysteresis hypothesis for unemployment rates in Central Africa, East Africa and North Africa; and convergence of inflation in Africa and its regions